IEA predicts price pinch

The export markets of Europe and Japan will decline as a result of higher electricity prices, according to the International Energy Agency's 2013 edition of its World Energy Outlook (WEO).

Currently, electricity prices for industrial consumers in Europe and Japan are more than double those in the USA. This large gap in prices is projected to be maintained through to 2035 in the latest WEO annual report, affecting company strategies and investment decisions in energy-intensive industries. While America sees its share of global exports of energy-intensive goods slightly increase to 2035, Europe and Japan would see their shares of global exports decline by 10% and 3% respectively from today's levels – representing a combined loss of around one-third of their current share.

Speaking at the launch of the report in London today, IEA chief economist and WEO Editor Fatih Birol said, "Lower energy prices in the USA mean that it is well-placed to reap an economic advantage, while higher costs for energy-intensive industries in Europe and Japan are set to be a heavy burden."

Referring to the situation in Japan, where none of its nuclear reactors are currently operating, Birol pointed out that imported natural gas prices in Japan are five times higher than in the USA. He said that it is important for the country "to think carefully whether or not to go back to the use of nuclear while it has to keep electricity prices down."

The annual WEO presents a central scenario in which global energy demand rises by one-third in the period to 2035, including a 45% increase in the power generation sector. By 2035, nuclear capacity is projected to increase to 578 GWe (from 371 GWe today) and account for around 4300 TWh of generation out of a total of 37,100 TWh from all sources. This would maintain nuclear's 12% share of the global electricity mix.

During the period to 2035, energy-related carbon-dioxide emissions are projected to rise by 20%, corresponding to a long-term average global temperature increase of 3.6ºC over pre-industrial levels, well above the internationally-agreed 2ºC target. "We are definitely off track in terms of carbon dioxide emissions," said Birol, adding that the share of fossil fuels in the global mix has remained at 82% over the last 25 years. The strong rise of renewables would only reduce this to around 75% in 2035.